Financial Policies & Procedures Manual · 2019. 9. 17. · 900 CONSULTANTS AND CONTRACTORS...

Financial Policies & Procedures

Manual

Approved by: Valley Collaborative Board of Directors

April 12th 2019

Valley Collaborative Financial Policies & Procedures Manual

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Contents 100 INTRODUCTION ........................................................................................................ 4

101 Scope and Organization ...................................................................................... 4 102 Purpose of Policies and Procedures Manual ....................................................... 4 103 Amending the Guide ........................................................................................... 4

PART I – POLICIES .................................................................................................................... 5 200 INTERNAL CONTROL POLICIES ......................................................................... 5

201 Compliance with Laws ....................................................................................... 5 202 Organizational Conflict of Interest or Self-Dealing (Related Parties) ................ 6 203 Valley Collaborative Board of Directors Authorities ......................................... 7 204 Signature Authorities .......................................................................................... 8 205 Government Access to Records .......................................................................... 8 206 Security of Financial Data .................................................................................. 8 207 Security of Collaborative Documents ................................................................. 8 208 Use of Collaborative Assets ................................................................................ 8 209 Use Of Collaborative Credit Cards ..................................................................... 8

300 FINANCIAL MANAGEMENT POLICIES .............................................................. 9 301 Basis of Accounting ............................................................................................ 9 302 Accounting Policies ............................................................................................ 9 303 Basis of Presentation ........................................................................................... 9 304 Revenues ............................................................................................................. 9 305 Expenditures ....................................................................................................... 9 306 In-Kind Expenses ................................................................................................ 9 307 Incurred Costs ..................................................................................................... 9 308 Cash Management ............................................................................................. 10 309 Accounts Receivable Aging Criteria ................................................................ 10 310 Grant/Contract Invoicing .................................................................................. 10 311 Investments ....................................................................................................... 10 312 Budgets ............................................................................................................. 10 313 Insurance and Bonding ..................................................................................... 11 314 Massachusetts Teacher Retirement System/Massachusetts State Employee Retirement System ....................................................................................................... 11 315 Record Retention and Disposal ......................................................................... 11 316 Financial Reporting ........................................................................................... 12 317 Audit ................................................................................................................. 13 318 Chart Of Accounts ............................................................................................ 13 319 Surplus Funds.................................................................................................... 13 320 Unclaimed/Uncashed Checks and Unclaimed Wages/Payments ..................... 13

400 POLICIES RELATED TO ASSETS, LIABILITIES, AND NET ASSETS ......... 14 401 Assets ................................................................................................................ 14 402 Bank Accounts .................................................................................................. 14


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403 Petty Cash Payments ......................................................................................... 14 404 Criteria for Capitalizing and Depreciating for Property and Equipment .......... 14 405 Impairment of Assets ........................................................................................ 14 406 Betterments ....................................................................................................... 14 408 Accounts Payable .............................................................................................. 15 409 Accounts Payable Payment Policy .................................................................... 15 410 Accrued Liabilities ............................................................................................ 15 411 Liability for Compensated Absences ................................................................ 15 412 Accrued Teachers’ Salary ................................................................................. 15 413 Debt ................................................................................................................... 16 414 Net Assets ......................................................................................................... 16 501 Consistency in Cost Accounting ....................................................................... 17 502 Unallowable Costs ............................................................................................ 17 503 Separate Records of Unallowable Costs ........................................................... 17 504 Cost Accounting Period .................................................................................... 17 505 Gain or Loss on Disposition of Assets .............................................................. 17

600 PROPERTY MANAGEMENT POLICIES ............................................................ 18 601 Property and Equipment ................................................................................... 18 602 Identification of Property .................................................................................. 18 603 Recording and Reporting of Property ............................................................... 18 604 Physical Inventories .......................................................................................... 18 605 Disposal of Property and Equipment ................................................................ 18

700 PROCUREMENT POLICIES .................................................................................. 19 701 Procurement – Goods and Services .................................................................. 19 702 Emergency Purchases ....................................................................................... 19 703 Procurement – Construction ............................................................................. 20 704 Procurement – Educational Services ................................................................ 20

800 PAYROLL AND TRAVEL POLICIES ................................................................... 21 801 Payroll Policies ................................................................................................. 21 802 Employee Mileage Reimbursement .................................................................. 21

900 CONSULTANTS AND CONTRACTORS POLICIES .......................................... 22 901 Consultant Utilization ....................................................................................... 22 902 Independent Contractors ................................................................................... 22

PART II – PROCEDURES ........................................................................................................ 23 1100 GENERAL ACCOUNTING PROCEDURES ......................................................... 23

1101 Overall Accounting System Design .............................................................. 23 1102 General Ledger Activity ............................................................................... 24 1103 General Ledger Close-Out ............................................................................ 25

1200 CASH MANAGEMENT PROCEDURES ............................................................... 26 1201 Cash Receipts ................................................................................................ 26 1202 Cash Disbursements ...................................................................................... 27 1203 Petty Cash Funds........................................................................................... 28 1204 Prepaid Items ................................................................................................ 28

1300 GRANTS MANAGEMENT PROCEDURES ......................................................... 29


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1301 Revenue Recognition and Invoicing ............................................................. 29 1302 Grants Receivable ......................................................................................... 30

1400 PAYROLL PROCEDURES ...................................................................................... 31 1401 Personnel Requirements................................................................................ 31 1402 Personnel Data .............................................................................................. 32 1403 Timekeeping ................................................................................................. 32 1404 Preparation of Payroll ................................................................................... 34 1405 Payroll Payment ............................................................................................ 35 1406 Payroll Withholdings .................................................................................... 36

1500 PROPERTY AND EQUIPMENT (P&E) PROCEDURES .................................... 37 1501 Property & Equipment Acquisitions ............................................................. 37 1502 Recordkeeping Over Property & Equipment ................................................ 38 1503 Depreciation .................................................................................................. 39 1504 Inventory of Property & Equipment ............................................................. 39 1505 Disposal of Property & Equipment ............................................................... 40 1506 Property & Equipment Acquired Through Government Grants/Contracts .. 41

1600 ACCOUNTS PAYABLE PROCEDURES ............................................................... 42 1601 Accounts Payable .......................................................................................... 42 1602 Purchasing ..................................................................................................... 43 1603 Expense Reimbursement ............................................................................... 45

1700 OTHER LIABILITIES PROCEDURES ................................................................. 46 1701 Accrued Liabilities ........................................................................................ 46 1702 Deferred Revenue ......................................................................................... 47

1800 MANAGEMENT REPORTING PROCEDURES .................................................. 48 1801 Annual Budget .............................................................................................. 48 1802 Financial Reporting ....................................................................................... 49 1803 Payroll Tax Compliance ............................................................................... 49

APPENDIX A: SAMPLE FORMS………………………………………………..……….51-58


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100 INTRODUCTION

Educational Collaboratives are formed by local school committees and charter boards under the provisions of Chapter 40, Section 4E. The purpose of an educational collaborative is to supplement and strengthen the programs and services of member school committees and charter boards. All educational collaborative agreements and amendments must be approved by the member school committees and charter boards (Board of Directors) and the Board of Elementary and Secondary Education. In an effort to achieve and ideally surpass these requirements, Valley Collaborative has developed this Policies and Procedures Manual. The Manual has been approved by the Valley Collaborative Board of Directors, and is intended to serve as a guiding resource towards best practices and stakeholder information. The Valley Collaborative Board of Directors acknowledges the guidance provided by the Massachusetts Department of Education during the development of this document. For further information please see “School Finance- Educational Collaboratives” issued by the Massachusetts Department of Education.

101 Scope and Organization

This manual consists of three sections: Part I - Policies Part II- Procedures Appendices- Sample Forms

102 Purpose of Policies and Procedures Manual

A. The Policies and Procedures manual is the official document for the accounting and

administrative functions conducted by Valley Collaborative.

B. The Policies and Procedures manual provides standards and directives for sound management and promotes consistent, prudent financial and administrative practices. Also, it also provides guidance to the Collaborative in the application of various federal and Massachusetts laws and regulations and the Department of Education’s requirements for the administration of grants and contracts awarded by the U.S. Government and other funding sources.

C. The Policies and Procedures manual is used in conjunction with and referenced to Valley

Collaborative’s existing personnel policy manual, job descriptions and other policy manuals maintained by the collaborative.

103 Amending the Guide

This document contains the essential fiscal policies and procedures for Valley Collaborative, as of

the above date of promulgation. From time to time, as additional matters require changes to this document, the management of Valley Collaborative shall amend this essential document. As the document changes, it will need to be reapproved by the Board of Directors.

http://www.doe.mass.edu/finance/collaboratives/


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PART I – POLICIES

200 INTERNAL CONTROL POLICIES

Valley Collaborative, under the direction of the Valley Collaborative Board of Directors, is required to establish and maintain adequate accounting records and internal control procedures. Internal control consists of five components: control environment, risk assessment, control activities, information and communication, and monitoring. The objectives of internal control relate to financial reporting, operations, and compliance.

Valley Collaborative and all levels of management are responsible for preventing and detecting instances of fraud and related misconduct and for establishing and maintaining proper internal controls that provide security and accountability of the resources of the Collaborative. Management is also responsible for recognizing risks and exposures inherent to these areas of responsibility and for being aware of indications of fraud or related misconduct.

Any employee with a reasonable basis for believing fraudulent or related misconduct has occurred should report such incidents to the designated authorities within the Collaborative or the Office of the Inspector General as stated in M.G.L Chapter 12A, §14 ‘Complaints by public employees; investigation.’ Internal control policies provide Valley Collaborative with the foundation to properly safeguard its assets, implement management’s internal policies, provide compliance with state and federal laws and regulations and produce timely and accurate financial information. The following policies highlight the areas of internal control that Valley Collaborative has considered: 201 Compliance with Laws

Valley Collaborative will follow all the relevant laws and regulations that govern Educational Collaborative within the Commonwealth of Massachusetts. Additionally, U.S. Government laws and regulations that relate to grant funding will be adopted as the grant funding is received. The following are specific policies of Valley Collaborative:

A. Political Contributions No funds or assets of Valley Collaborative may be contributed to any political party or

organization or to any individual who either holds public office or is a candidate for public office. The direct or indirect use of any funds or other assets of Valley Collaborative for political contributions in any form—whether in cash or other property, services, or the use of facilities—is strictly prohibited. Valley Collaborative also cannot be involved with any committee or other organization that raises funds for political purposes.

Following are examples of prohibited activities:

1. Contributions by an employee that are reimbursed through expense accounts or in other ways.

2. Purchase by the organization of tickets for political fundraising events.

3. Contributions in-kind, such as lending employees to political parties or using the Collaborative’s assets in political campaigns.


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B. Record Keeping To provide an accurate and auditable record of all financial transactions, the Collaborative’s

books, records, and accounts are maintained in conformity with generally accepted accounting principles as required by the Commonwealth’s statutes, applicable to Educational Collaboratives.

Further, the Collaborative specifically requires that:

1. No funds or accounts may be established or maintained for purposes that are not fully and accurately described within the books and records of the Collaborative.

2. Receipts and disbursements must be fully and accurately described in the books and records.

3. No false entries may be made on the books or records nor any false or misleading reports issued.

4. Payments may be made only to the contracting party and only for the actual services rendered or products delivered. No false or fictitious invoices may be paid.

202 Organizational Conflict of Interest or Self-Dealing (Related Parties)

Valley Collaborative may not be operated for the benefit of an affiliated or unaffiliated organization

or an individual in his or her own private capacity or individuals related to Valley Collaborative or members of its management, unless the private benefit is considered merely incidental. Valley Collaborative will follow M.G.L. Chapter 268A and M.G.L. Chapter 71, §89(v) conflict of interest laws and disclosures which restrict public officials and employees from taking advantage of their position to gain improper benefits for themselves, relatives, their associates, or their friends. The law also restricts board members from voting on matters affecting their financial interest and limits the circumstances under which they can receive anything of value because of their official position. A board member may not vote or enter into any discussion if one of the following groups will receive financial benefit:

A. The Trustee, his/her immediate family, or his/her business partner; B. A business organization in which the Trustee is serving as an officer, Valley Collaborative,

trustee, partner or employee; or C. Any person or organization with which the Trustee is negotiating or has any arrangement

concerning prospective employment (M.G.L. Chapter 268a, §6). The private benefit preclusion will extend to: A. Sale or exchange, or leasing, of property between the Collaborative and an affiliated or

unaffiliated organization or a private or related individual. B. Lending of money or other extension of credit between the Collaborative and an affiliated

organization (excluding component units) or unaffiliated organization or a private or related individual.


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C. Furnishing of goods, services or facilities between the Collaborative and an affiliated organization (excluding component units) or unaffiliated organization or a private or related individual.

D. Payment of compensation, unless authorized by the Valley Collaborative Board of Directors

or its governing body, by the Collaborative to an affiliated or unaffiliated organization or a private or related individual.

E. Transfer to, use by, or for the benefit of a private or related individual of the income or assets

of the Collaborative.

Thus, Valley Collaborative will be guided by the principle of arms-length standards with all affiliated or unaffiliated organizations or with a private or related individual(s). Annually, the Valley Collaborative Board of Directors will file a financial disclosure form as required by M.G.L. Chapter 40, section 4(e).

Related party transactions shall include transactions between a school and members of the board, management, contracted management organization, employees, related individuals and affiliated companies. Related individuals within the scope of this definition include spouses, parents, children, spouses of children, grandchildren, siblings, father-in-law, and mother in law, sister-in-law and brother-in-law of a board member or Collaborative employee. 203 Valley Collaborative Board of Directors Authorities

The Valley Collaborative Board of Directors is responsible for the operation of Valley Collaborative in accordance with the provisions of M.G.L. Chapter 40, Section 4E and all other state and federal laws and regulations and conditions as the Board or Commissioner of Education may establish from time to time. The Valley Collaborative Board of Directors is also responsible for operating the Collaborative in accordance with the representations made in its Educational Collaborative application submitted to and approved by the Board of Education. Specifically, the Valley Collaborative Board of Directors shall have the sole authority to approve and will incorporate into its own minutes such matters as (i) change of the Collaborative’s name, with the Department of Education’s Educational Collaboratives office approval (ii) adoption of the annual operating and capital budgets, (iii) selection or termination of key employees (iv) key employees’ salary and salary changes, (v) incurrence of debt, mortgages or other encumbrances and their covenants and restrictions, within the terms of the collaborative (vi) investment policies, (vii) depository and investment banks, (viii) purchase or sale of property (ix) opening up or closing checking or savings accounts, and (x) selection of Valley Collaborative’s certified public accountants and (xi) other activities associated with the operations of Valley Collaborative.

The Valley Collaborative Board of Directors will meet regularly to ensure that its fiduciary duty is maintained. The Board will review the following: prior meeting minutes, business items, educational items, subcommittee reports, Executive Director Reports, new business and other items. For additional guidance on the regulatory and statutory obligations of a Valley Collaborative Board of Directors, please refer to the Commonwealth of Massachusetts Department of Education’s publication, Duties and Responsibilities of Collaborative Board Members and Boards of Directors, which can be found at http://www.doe.mass.edu/finance/collaboratives/DutiesResponsibilities.pdf

http://www.doe.mass.edu/finance/collaboratives/DutiesResponsibilities.pdf


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204 Signature Authorities All checks are signed by Valley Collaborative’s Treasurer. Any check over $10,000.00 requires the

signature of both Executive Director and Treasurer. The Treasurer is responsible for authorizing all cash transfers between banking entities.

205 Government Access to Records

The Business Manager / Accountant will provide access to Valley Collaborative's records if

requested to the Comptroller General of the Commonwealth of Massachusetts or his designee and provide supporting records, as requested by government auditors, to facilitate the completion of such audits or reviews in a timely manner.

206 Security of Financial Data

A. The Collaborative’s accounting software should be reviewed to ensure that general and

application controls to unauthorized access to data is precluded (i.e., proper password protection and authorizations for inquiry or browse only functions.)

B. The system's accounting data is hosted offsite and is continuously backed up offsite. This is

done to ensure the recoverability of financial information in case of hardware failure. C. All other financial data, petty cash box, unused checks and unclaimed checks will be secured

by the Business Manager / Accountant and his staff from unauthorized access. 207 Security of Collaborative Documents

Originals of the following corporate documents are maintained and their presence is verified on a

periodic basis:

A. Articles of Agreement and all related amendments B. Minutes of the Valley Collaborative Board of Directors C. Banking agreements D. Leases E. Insurance policies F. Vendor invoices G. Grant and contract agreements H. Fixed asset inventory list I. Contract and grant billings 208 Use of Collaborative Assets

Collaborative employees should not use any of the Collaborative’s assets for personal use without

prior approval and proper justification.

209 Use Of Collaborative Credit Cards

Valley Collaborative credit cards are limited to Commercial Charge Cards used by department heads of Operations and Technology as well as Vocational Shops. Each account has a spending limit. Receipts are required to be turned in post-purchase to match with Commercial Charge Card monthly statement.


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300 FINANCIAL MANAGEMENT POLICIES

Educational Collaboratives are granted a program approval by the Board of Education of the Commonwealth of Massachusetts under MGL Chapter 40, Section 4E. Educational Collaboratives are considered public entities and shall follow all Commonwealth of Massachusetts and Federal Laws and Regulations as such. 301 Basis of Accounting

Valley Collaborative will maintain its accounting records and related financial reports on the accrual

basis of accounting. 302 Accounting Policies

The accounting policies and financial reporting adopted are consistent with the special purpose governmental entity requirements of the Governmental Accounting Standards Board (GASB), including Statement of Governmental Accounting Standards No. 34 – Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments. GASB is the recognized standard setting body for establishing governmental accounting and financial reporting principles. Pursuant to GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the Collaborative has elected to apply the provisions of all relevant pronouncements of Financial Accounting Standards Board (FASB) that do not conflict with or contradict GASB pronouncements. 303 Basis of Presentation Valley Collaborative adheres to all Federal, State and Department of Education guidelines as they apply to Educational Collaboratives. As referred to as a “Special Education School District” by the Commonwealth, the Collaborative presents accounts as specified by the Commonwealth of Massachusetts and the Department of Elementary and Secondary Education.

304 Revenues Under the accrual basis of accounting, revenues are recognized when earned, consistent with generally accepted accounting principles applicable to Educational Collaboratives. 305 Expenditures

Under the accrual basis of accounting, expenses are recognized when services are incurred or goods are received. 306 In-Kind Expenses

The collaborative recognizes services that are donated, if these services would have been purchased by the collaborative if not donated (e.g., transportation). These expenses are recorded when incurred. 307 Incurred Costs

For the purpose of invoicing funding sources for allowable costs under cost reimbursement grants or

contracts, the term "costs incurred" is defined as follows: costs related to items or services incurred


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directly for the grant or contract and received at the time of the request for reimbursement and not specifically disallowed by the funding source.

308 Cash Management

A. The collaborative maintains the following cash accounts:

1. Payroll

2. Operating

3. Community Catering

4. Independence Project

5. ICS MMDA

6. MMDT Investments

7. OPEB Liability

B. A schedule of aged accounts and grants receivable is prepared monthly and reviewed by the Business Manager / Accountant for collection. Appropriate collection procedures are initiated, if necessary.

309 Accounts Receivable Aging Criteria

Outstanding accounts receivable are aged on a thirty, sixty, ninety, and over-ninety day basis.

310 Grant/Contract Invoicing

In accordance with state finance regulation 815 CMR 2:00, section 2.05 (4)(b), Grant Effective Start Date, grant recipients may expend state, federal, and other grant funds only as of the date their grant (the Standard Contract Form) was executed by the authorized signatory of the Department of Education. In the case of the Department of Education, this means the date that the grant is entered as approved into the Department of Education's grants management system.

A. All invoices are submitted to the funding sources by dates specified in the grant or contract

agreement. B. The invoicing format is that specified by the funding source.

311 Investments

Valley Collaborative shall follow, to the extent possible, M.G.L. Chapter 44 Municipal Finance in

regards to purchasing investments.

312 Budgets A. Valley Collaborative shall prepare an annual operating budget of revenues and expenses, a

cash flow projection, and a capital budget. These budgets and projections shall be reviewed and approved by the Valley Collaborative Board of Directors at the annual meeting and modified, as necessary.


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B. Financial statements displaying budget vs. actual results shall be prepared by the Business Manager / Accountant and reviewed by Executive Director and the Treasurer and presented to the Valley Collaborative Board of Directors at each board meeting.

313 Insurance and Bonding

A. The Collaborative maintains minimum levels of coverage, as deemed appropriate by the

Valley Collaborative Board of Directors, for the follow policies:

1. General liability

2. Business & personal property (including auto/bus)

3. Computer equipment

4. Workers' compensation

5. Personal injury liability

6. Fidelity bond

7. Directors and Officers Insurance

8. Excess Liability

B. The Collaborative requires proof of adequate insurance coverage from all prospective

contractors, as deemed applicable.

314 Massachusetts Teacher Retirement System/Massachusetts State Employee Retirement System The Massachusetts Teacher Retirement System (MTRS) and Massachusetts State Employee Retirement System (MSERS) are contributory retirement systems designed to provide benefits to Massachusetts Teachers, Administrators and State Employees per MGL Chapter 32. Staff members employed by the Collaborative who are eligible for membership are required to join the system. See http://www.mass.gov/mtrb/ or http://www.mass.gov/treasury/retirement/ for full details about eligibility, required payroll deductions and reporting deadlines. 315 Record Retention and Disposal

A. Records are maintained for the following minimum periods:

1. Books, records, documents, and other supporting evidence including paid, cancelled, or voided checks, accounts payable records, vendors' invoices, payroll sheets and registers of salaries and wages, tax withholding statements, employee timesheets and other public documents are retained for seven years after the original entry date.

B. The following records supporting federal contracts, as required by U.S. Office of Management

and Budget, are retained for the indicated minimum periods:

1. For three years after submission of the final report of expenditures: general ledger, trial balance, accounts payable and accounts receivable ledger, payroll register, and petty cash book, check register and checks, invoices. Except for:

a) If any litigation, claim, or audit is started before the expiration of the 3-year period, the records shall be retained until all litigation, claims or audit findings involving the records have been resolved and final action taken.

http://www.mass.gov/mtrb/

http://www.mass.gov/treasury/retirement/


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b) Records for real property and equipment acquired with Federal funds shall be retained for 3 years after final disposition.

2. Permanently: Audit reports, annual corporate reports, board minutes, tax and legal correspondence, labor contracts, insurance claims and policies, and retirement and pension records.

C. The disposal date determined under this policy is the end of the fiscal year, or the date of final

payment of government grants.

D. All records not supporting government grants or otherwise covered by rules of the Internal Revenue Service are retained for three years from the end of the fiscal year in which the records were originally prepared.

E. All financial records are maintained in chronological order, organized by fiscal year.

F. In connection with the disposal of any records, a memorandum of record disposal shall be

prepared by the Business Manager / Accountant listing the record or the class of records disposed of. The Valley Collaborative Board of Directors shall certify this memorandum of records disposal.

316 Financial Reporting

The Business Office maintains supporting records in sufficient detail to prepare the Collaborative's

financial reports, including: A. Annually:

1. Financial statements for audit

2. Annual budget B. Monthly:

1. Trial balance

2. Internally generated budget vs. actual financial statements with explanations for significant variances

3. Billing invoices to funding sources

4. Updating of the cash flow projection

5. Accounts receivable aging report

6. Accounts payable listing

C. Quarterly:

1. IRS Form 941 and payroll tax returns and comparable state taxing authority returns

2. Other reports upon request


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317 Audit

The Valley Collaborative Board of Directors shall contract annually with a qualified independent certified public accounting firm to conduct an audit of Valley Collaborative’s financial statements in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards issued by the Comptroller General of the United States, 2003 Revision (GAS) and, if applicable, the U.S Office of Management and Budget’s Circular A-133. The selected audit firm must be familiar with these standards, related Commonwealth of Massachusetts and Educational Collaborative regulations, specifically 603 CMR 50.07- (12): Audit: Each collaborative shall annually have an independent audit conducted of its accounts, in accordance with generally accepted government auditing standards, and consistent with any guidelines the Department may issue. Such audit will be conducted consistent with 603 CMR 50.08(2). Audit results shall be discussed annually at a public meeting of the collaborative board of directors.

318 Chart Of Accounts

The Chart of Accounts of Valley Collaborative is noted in Appendix A. The chart of accounts will assist Collaboratives in managing their operations, preparing financial statements and also facilitating their preparation of the End of Year Financial Report as required by the regulation 603 CMR 50.00 and Massachusetts General Law Chapter 40 section 4E. 319 Surplus Funds

At the end of the fiscal year, unexpended general funds, as defined by 603 CMR 50.07, plus any previous year’s remaining surplus funds, as determined through the Collaborative’s financial statements, will be considered cumulative surplus funds. On an annual basis, the Board shall, upon review of the Collaborative’s audit results for the previous fiscal year, determine by a majority vote the final dollar amount of cumulative surplus funds. Surplus funds shall not include funds deposited in a capital reserve as provided for in 603 CMR 50.07(10), funds deposited in trust in accordance with Massachusetts General Laws, Chapter 32B, Section 20, or any amounts prepaid for tuition or services in accordance with Massachusetts General Laws, Chapter 40, Section 4E. As set forth in 603 CMR 50.07(9), in no event shall cumulative surplus funds exceed twenty-five percent (25%) of the previous fiscal year’s general expenditures from the Collaborative Fund.

320 Unclaimed/Uncashed Checks and Unclaimed Wages/Payments

Valley Collaborative uses frequent reconciliation and diligence to determine the presence unclaimed or uncashed checks as well as unclaimed wages or payments. The Collaborative will continue to seek out the assignee by all contact means available. The Collaborative adheres to M.G.L. 200A when handling each instance.


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400 POLICIES RELATED TO ASSETS, LIABILITIES, AND NET ASSETS

401 Assets

Economic resources that are recognized and measured in conformity with generally accepted accounting principles. Assets also include certain deferred charges that are not resources, but are recognized and measured in conformity with generally accepted accounting principles. The following sections describe policies related to the recognition of assets.

402 Bank Accounts

Bank accounts have been authorized at Federal Deposit Insurance Corporation (FDIC) or Depository Insurance Fund of Massachusetts (DIFM) insured banks.

403 Petty Cash Payments A. Petty cash payments shall be made from a fund not to exceed $250, and should be for cash

advances, local expense reimbursement, and small-dollar vendor purchases, provided proper documentation is furnished with each request.

B. The petty cash account shall be balanced on a monthly basis by the petty cash custodian. The

replenishment check is made out to Petty Cash “School Name” on an as needed basis.

404 Criteria for Capitalizing and Depreciating for Property and Equipment

All tangible personal property with a useful life equal to or more than three years and a unit acquisition cost of $5,000 or more is capitalized and recorded in the statement of net assets. Depreciation associated with the fixed asset will be calculated based on its useful life and straight-line depreciation method. The depreciation expense will be recorded in the statement of revenues, expenses, and changes in net assets. 405 Impairment of Assets

A recognized impairment of an asset is reflected when circumstances warrant. The appropriate

adjustment is made for any impaired assets, accompanied by a description of the impaired asset and the measurement assumptions used in determining the impairment. All impairments shall be reported.

406 Betterments

Expenditures for significant betterments of existing leased/owned properties are recorded in fixed assets at cost. Maintenance and repairs are expensed as incurred. Depreciation associated with the betterment will be calculated based on its useful life and straight-line depreciation method. The depreciation expense will be recorded in the statement of revenues, expenses, and changes in net assets.


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407 Liabilities

Economic obligations that are recognized and measured in conformity with generally accepted accounting principles. Liabilities also include certain deferred amounts that are not obligated, but are recognized and measured in conformity with generally accepted accounting principles. The following sections describe policies related to the recognition of liabilities.

408 Accounts Payable

Only valid accounts payable transactions based on documented vendor invoices, receiving reports, or

other approved documentation are recorded as accounts payable.

409 Accounts Payable Payment Policy Vendors and suppliers are paid after goods and/or services are delivered. If cash flow problems

exist, payments are made on a greatest dependency/greatest need basis.

410 Accrued Liabilities Salaries, wages earned, and payroll taxes, together with professional fees, rent, and insurance costs

incurred, but unpaid, are reflected as a liability when entitlement to payment occurs.

411 Liability for Compensated Absences A. Compensated absences arise from employees' absences from employment due to vacation

leave or other school-designated circumstances. When Valley Collaborative expects to pay an employee for such compensated absences, a liability for the estimated probable future payments is accrued if all of the following conditions are met:

1. The employee's right to receive compensation for the future absences is attributable to services already performed by the employee.

2. The employee's right to receive the compensation for the future absences is vested or accumulates.

3. It is probable that the compensation will be paid.

4. The amount of compensation is reasonably estimable. B. Compensated absences not required to be paid upon employee termination are only recorded

when paid.

412 Accrued Teachers’ Salary

The portion of any teachers’ salaries and benefits paid for a school year that extends into the next fiscal year (e.g., a twelve-month salary schedule from August 16th to August 15th of the following year) shall be accrued at the end of the fiscal year for which services were rendered.


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413 Debt

A. When applicable, short-term debt consists of financing expected to be paid within one year of

the date of the annual audited financial statements. Long-term debt consists of financing that is not expected to be repaid within one year.

B. All short-term and long-term debt is approved by the Valley Collaborative Board of Directors and may not exceed the duration of the Educational Collaborative without the consent of the Board of Education.

C. Loan agreements approved by the Valley Collaborative Board of Directors should be in

writing and should specify all applicable terms, including the purpose of the loan, the interest rate, and the repayment schedule.

414 Net Assets

Net assets are recorded in accordance with generally accepted accounting principles applicable to

special purpose governmental units. Net assets include the following:

A. Unrestricted

B. Restricted

C. Investment in Capital Assets, net of related debt


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500 COST ACCOUNTING POLICIES

501 Consistency in Cost Accounting Practices used by Valley Collaborative in estimating costs in grant/contract proposals shall be

consistent with its accounting practices used in accumulating and reporting costs. Accounting practices used by Valley Collaborative in accumulating and reporting actual costs shall be consistent with its practices used in estimating costs in its grant and contract proposals.

502 Unallowable Costs

Costs expressly unallowable or mutually agreed to be unallowable shall be identified in separate

general ledger accounts and excluded from billings to a grant or contract with the respective funding source. Available guidance includes, but is not limited to, OMB Circular A-87 - Cost Principles for State, Local and Indian Tribunal Governments, OMB Circular A-102 - Grant and Cooperative Agreements with State and Local Governments, OMB Circular A-133 - Audits of State and Local Governments and Nonprofit Organizations.

503 Separate Records of Unallowable Costs

Valley Collaborative shall maintain separate records of all expressly and mutually agreed upon

unallowable costs.

504 Cost Accounting Period The fiscal year of Valley Collaborative shall be July 1st through June 30th. The same accounting

period is used for all adjusting entries and accruals.

505 Gain or Loss on Disposition of Assets Gains and losses from the sale or other disposition of property shall be recorded as revenue in the

year in which they occur, and shall be reflected as such on the Statement of Revenue, Expenditures, and Changes in Net Assets.


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600 PROPERTY MANAGEMENT POLICIES

601 Property and Equipment

Valley Collaborative shall maintain detailed records of all government-furnished property and equipment, with an identification and segregation of property and equipment acquired through government contracts. 602 Identification of Property

Valley Collaborative shall tag all property upon receipt and shall assign an identification number to the property and all applicable documents. 603 Recording and Reporting of Property A. Valley Collaborative shall maintain a log identifying all property in its possession, as follows:

1. Name and description

2. Serial number, model number, or other identification

3. Whether title vests with Valley Collaborative or a governmental entity

4. Vendor name, acquisition date, and cost

5. Location and condition of the equipment

6. Ultimate disposition data, including date of disposal and sales price or method of disposal

604 Physical Inventories

A. Valley Collaborative shall perform a physical inventory of all property in its possession or

control on an annual basis. B. The physical inventory records shall include at a minimum each asset, the related control

number, location, and a brief description of its condition.

C. The physical inventory shall be reconciled to the detailed fixed asset subsidiary ledger, and differences, if any, shall be investigated and reconciled.

605 Disposal of Property and Equipment

A. No item of property or equipment shall be removed from the premises without prior approval

from the Business Manager / Accountant and/or Executive Director. B. When property is retired, the appropriate asset in the fixed asset subsidiary shall be adjusted

and properly reflected in the general ledger.


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700 PROCUREMENT POLICIES

701 Procurement – Goods and Services

Valley Collaborative shall procure only those items and services that are required in order to perform the mission and/or fill a bona fide need. Valley Collaborative is required to designate a procurement officer who must participate in the public purchasing official certification program conducted by the Office of the Inspector General.

Procurements shall be made using best value contracting which includes assessing the best value considering quality, performance and price. MGL, Chapter 30B is required to be followed by all Commonwealth Educational Collaboratives. Collaboratives shall use a competitive procurement process, which requires sound business practices for purchases less than $10,000. The Collaborative will also select the best value by obtaining three written quotes for items greater than $10,000 and less than $35,000. Finally, a formal bid process will be used for items greater than $35,000, in which bids will be received and evaluated using a formal evaluation process.

A. The Collaborative shall adhere to the following objectives:

1. Procurements will be completely impartial based strictly on the merits of supplier and contractor proposals and applicable related considerations such as delivery, quantity, etc.

2. Make all purchases in the best interests of the Collaborative and its funding sources.

3. Obtain quality supplies/services needed for delivery at the time and place required.

4. Buy from responsible and dependable sources of supply.

5. Obtain maximum value for all expenditures.

6. Deal fairly and impartially with all vendors.

7. Be above suspicion of unethical behavior at all times; avoid any conflict of interest, related parties or even the appearance of a conflict of interest in Valley Collaborative supplier relationships.

8. Adhere to all MGL 30B requirements and guidelines.

B. Valley Collaborative shall execute a Purchase Order for all purchases and it shall be approved by the Executive Director of Valley Collaborative.

C. All lease agreements shall be evidenced by a lease or sublease agreement approved by the Valley Collaborative Board of Directors and signed by the Executive Director. The agreement will identify all the terms and conditions of the lease. Any real estate agreement to rent or sell will require a beneficial interest disclosure as required in MGL Chapter 7, §40J.

702 Emergency Purchases

An “emergency purchase” is the purchase of goods or services that are so badly needed that the Collaborative will suffer financial or operational damage if they are not secured immediately. A decision to purchase may be declared in an emergency at the Collaborative’s discretion and “best value” procurement guidelines must be followed. In addition, the purchase must be authorized by the Executive Director.


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703 Procurement – Construction The Collaborative is required to comply with certain laws while constructing a new facility or performing construction on its current facility. These laws include numerous federal and state laws inclusive of the Commonwealth’s public bidding and prevailing wage laws. When undertaking construction or renovation projects, the Collaborative shall seek advice from the Commonwealth of Massachusetts Office of the Attorney General and the Commonwealth of Massachusetts Division of Occupational Safety regarding the applicability of these laws and also the advice of legal counsel regarding the specific construction project. Educational Collaboratives will follow all regulations and guidelines set forth by M.G.L Chapter 30B.

Public Bidding Laws - This law applies to the “construction, reconstruction, installation, demolition, maintenance or repair of any building by a public agency estimated to cost more than $35,000” (M.G.L. c. 149, § 44A(2)). Educational Collaboratives are considered public agencies under the statutes of the Commonwealth.

Prevailing Wage Statute - This law requires payment of a minimum hourly wage rate for certain classifications of labor performed on state and local construction projects. (M.G.L. c. 149, §§ 26-27D). The Division of Occupational Safety issues prevailing wage schedules for construction projects covered by the prevailing wage statute and determines whether the prevailing wage statute applies to certain construction projects.

704 Procurement – Educational Services

The Commonwealth of Massachusetts Board of Education must approve the terms of the contracts with individuals or organizations that provide “substantially all educational services” (M.G.L. 71, §89(j)(5). These contracts are not valid or in effect prior to receiving final approval from the Board of Education.


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800 PAYROLL AND TRAVEL POLICIES

801 Payroll Policies

A. Employee Types/Schedules: 1. Year-Round Employees are paid on a 12-month, bi-weekly schedule from July 1st to

the following June 30th. 2. Extended School Year Employees are paid on a 12-month, bi-weekly schedule from

July 1st to the following June 30th. 3. School Year Employees are paid on a 10-month bi-weekly schedule from early

September to late June. B. Employee’s time is properly approved by both the individual and the supervisor and reported

to the Business Office or designated representative.

C. All employee payroll amounts are calculated based upon approved rates included in the individual’s personnel file.

D. Any changes to the pay rates or benefits are properly authorized. E. Valley Collaborative issues STIPENDS to Leadership and Mentorship positions that have

taken on additional responsibilities from their contract in order to make Valley Collaborative better for Students and Adults.

F. All payroll taxes—including MTRS and MSERS deductions—and benefits are properly

calculated and any deposits made in a timely manner.

G. Payroll liabilities and expenses are recorded in the general ledger by the Business Manager / Accountant after review and approval of the payroll register.

H. All payroll tax reports are prepared in a timely manner and reviewed by a designated

individual for accuracy prior to filing.

802 Employee Mileage Reimbursement A. All employees are reimbursed at a standard mileage rate per mile, as established annually by

the Internal Revenue System. In addition, parking fees and tolls paid are reimbursable if properly supported.

B. All employees requesting such mileage reimbursement are required to furnish a Travel

Report containing the destination of each trip, its purpose and the miles driven, parking fees and tolls, within one month after the travel date. Each employee is responsible for detailing the travel and related expenses and including the required supporting documentation.

C. The travel report must be signed by the employee and approved by their direct supervisor.


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900 CONSULTANTS AND CONTRACTORS POLICIES

901 Consultant Utilization The utilization of all consultants and contract personnel shall be sufficiently evidenced by: A. Details of all agreements (e.g., work requirements, rate of compensation, and nature and

amount of other expenses, if any) with the individuals or organizations providing the services and details of actual services performed.

B. Invoices or billings submitted by consultants, including sufficient detail as to the time

expended and nature of the actual services performed.

C. The use of a management contract for educational and administrative services will clearly identify the contractor’s performance requirements, including students’ academic achievement, contractor’s compensation and Valley Collaborative’s rights to educational curricula and intellectual property developed. If the contract provides substantially all educational services, then the contract will be approved by the Commonwealth of Massachusetts Board of Education prior to signature by Valley Collaborative. (Also see Section 704: Procurement – Educational Services.)

902 Independent Contractors

The use of consultants shall be closely monitored so as not to vary from the rules of the Internal

Revenue Code and M.G.L Chapter 193. In particular, consultants will: A. Be free from the employer’s control and direction in performing the service, both under a

contract and in fact. B. Provide a service that is outside the employer’s usual course of business. C. Must be engaged in an independent trade, occupation, profession, or business of the same

type. D. Not receive any fringe benefits as such, although their fee may include provision for fringe

benefits. E. Not be assigned a permanent workstation. F. Use own stationery or time sheet in billing for services.


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PART II – PROCEDURES The following section provides the procedures which will support the policies contained in Part I of this document.

1100 GENERAL ACCOUNTING PROCEDURES In this section, procedures are described for the overall accounting system design, General Ledger activity and General Ledger closeout for Valley Collaborative.

1101 Overall Accounting System Design

Control Objective

To establish a coding structure that supports financial reporting and management’s decision-making. Major Controls

A. Business Manager / Accountant Involved in Designing the Chart of Accounts/Coding Structure

To support decision-making, the Business Manager / Accountant, along with assistance from additional resources, including Executive Director, management, and outside consultants, shall be involved from the outset in setting the chart of accounts/coding structure. The coding generally follows a four-digit general ledger account number with classes designated for grants or other funding to be accounted for separately.

B. Establishment of Control Accounts

Control accounts for fixed assets, accounts receivable and accounts payable shall be established with subsidiary detail listings and will be reconciled monthly to these control accounts.

C. Use of Contra Accounts

If necessary, the accounting structure shall provide for offsetting contra accounts (e.g. an allowance for doubtful accounts, accumulated depreciation) to adjust historical cost to current levels for financial reporting purposes.

D. Segregation of Unallowable Costs

Accounts shall be established to capture and segregate unallowable costs.


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1102 General Ledger Activity

Control Objective

To ensure that all General Ledger entries are current, accurate, and complete.

Major Controls

A. Timeliness of Entries

All entries shall be made soon after the underlying accounting event to ensure the financial records and reporting is current.

B. Support Documentation

All entries shall be supported by adequate documentation that clearly indicates the justification and authorization for the transaction.

C. Audit Trail

A complete audit trail shall be maintained by the use of reference codes, from source documentation through the books of original entry and general ledger, to periodic reporting statements.

Procedures

1. Financial data on source documentation shall be verified against original documents (e.g., invoice, purchase order, etc.) by the Business Manager / Accountant before entering into the accounting system.

2. Provisions shall be made for using recurring General Journal entries for certain transactions, such as recording the monthly portion of prepaid insurance.

3. Non-recurring entries, such as for correcting entries, recording accruals, and recording non-cash transactions, shall be prepared as circumstances warrant and on an as needed basis.

4. All entries in the books of original entry (e.g., cash receipts journal and disbursements) shall be made soon after the accounting event from authorized forms, and are prepared and reviewed by qualified accounting personnel.


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1103 General Ledger Close-Out

Control Objective

To ensure the accuracy of financial records and reports.

Major Controls

A. Trial Balance

Monthly, a trial balance shall be prepared to ensure the accuracy of the general ledger account balances.

Procedures

1. At the end of each month, a trial balance of all general ledger accounts shall be prepared by the Business Manager / Accountant.

2. At fiscal year-end and after the annual audit, all income and expense accounts shall be closed out, and the general ledger balances shall agree to the audited financial statements.


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1200 CASH MANAGEMENT PROCEDURES In this section, procedures are described for cash receipts, cash disbursements, and petty cash funds and prepaid items.

1201 Cash Receipts

Control Objective

To record cash receipts completely and accurately and to prevent the diversion of cash assets.

Major Controls

A. Cash Receipts Policies

Valley Collaborative shall have internal control systems in place to monitor cash receipts, and to ensure that deposits are made in a timely manner.

B. Internal Accounting Controls

(i) Opening of mail shall be assigned to an employee with responsibilities independent of access to files or documents pertaining to accounts receivable or cash accounts.

(ii) Listed receipts and credits shall be compared to the accounts receivable and bank deposits. (iii) General Ledger control accounts shall be reconciled with the Accounts Receivable

Subsidiary Ledger.

Procedures

1. Mail shall be opened by the Receptionist who sorts the checks and forwards them to the Business Office, if applicable, or Business Manager / Accountant

2. All checks shall be restrictively endorsed immediately by the Business Clerk or Executive Assistant.

3. The Accounting Manager, if applicable, or Business Manager / Accountant shall prepare all journal entries and deposit slips.

4. A copy of each check to be deposited shall be made via deposit software, and is able to be sourced as needed.

5. The Accounting Manager, if applicable or Business Manager / Accountant shall input all journal entries.

6. Accounting Manager shall make deposits on a daily or no later than on a weekly basis. If deposits are made other than daily, the deposit shall be maintained in a secure area with limited access.

7. The Business Manager / Accountant or Treasurer shall perform reconciliation of cash receipts to deposit slips and bank statements on a monthly basis.


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1202 Cash Disbursements

Control Objective

To disburse cash for authorized purposes and record cash disbursements completely and accurately.

Major Controls

A. Cash Disbursement Policies

Check preparation and signatures shall be delayed until the due date, consistent with discounts, if available.


(i) Checks shall be pre-numbered and printed on special check protective paper. (ii) The Executive Assistant shall match disbursement records against accounts payable/open

invoice files on a monthly basis. (iii) Bank statements shall be reconciled to cash accounts and any outstanding checks verified by

either the Business Manager / Accountant or the Accounting Manager, if applicable on a monthly basis.

(iv) Supporting documentation shall be provided by to the Accounting Manager for all canceled invoices to prevent resubmission for payment.

(v) The Business Manager / Accountant shall perform a detailed comparison of actual vs. budget disbursements on a periodic basis.

(vi) Separation of duties shall be accomplished to the extent possible for an organization the size of the Collaborative.

Procedures

1. When the transaction is complete and payment is due, a pre-numbered check is prepared by the Accounting Manager who attaches all supporting documentation: (e.g. vendor invoice, purchase order, purchase requisition, etc.) and submits the package to the Executive Director or the Treasurer for approval.

2. All invoices submitted for signature will include approvals for payment, expense account(s) charged, grant account(s) charged, if applicable; check number and date of payment.

3. The Executive Director or the Treasurer signs checks, after examining the supporting documentation.

4. After having been signed, the checks shall be mailed directly to the payee by Business Clerk or Executive Assistant.

5. All supporting documents shall be canceled (i.e. stamped PAID) by the signatory and filed by Accounting Manager or assistant.

6. On a monthly basis, cash disbursement records shall be matched against accounts payable/open invoice files for any discrepancies.

7. Bank statements shall be reconciled soon after receipt by either the Business Manager / Accountant.


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1203 Petty Cash Funds

Control Objective

To control the use of petty cash funds for valid transactions.

Major Controls

Internal Accounting Controls

Reconciliation of petty cash funds shall be by employees with responsibilities independent of cash receipts, disbursements or custody.

Procedures

1. Valley Collaborative shall maintain a petty cash fund with a balance of not more than $250, which will be maintained and secured by the Accounting Manager.

2. The Business Office shall maintain a log of all disbursements made from the petty cash fund and they shall use a Petty Cash Voucher for all petty cash disbursements.

3. When the fund needs to be replenished, the Accounting Manager shall prepare a check request. The check request will include the log of disbursements and the supporting vouchers as an attachment. See cash disbursement procedure above for payment.

4. Any differences between the check request to bring the fund up to the petty cash amount and total disbursements made shall be reviewed and a written justification for the variance shall be prepared.

5. Fund disbursements are entered into the general ledger by expense category when the fund is replenished.

1204 Prepaid Items

Control Objective

To ensure proper accounting for prepaid expenses.

Major Controls


(i) Preparation and updating of an amortization schedule to reflect the incurring of expenses for prepaid items (e.g., prepaid insurance).

(ii) Detailed prepaid expenses reconciled with the general ledger control account.

Procedures

1. Vendor invoices shall be reviewed by the Business Office to identify all required prepayments. 2. For payment of prepaid items, the transaction shall be coded to reflect the appropriate portion of

the payment representing the prepaid portion. 3. An amortization schedule shall be prepared to reflect the incurring of an expense for prepaid items. 4. A standard journal entry shall be prepared by the Business Office, if applicable to record the

monthly expense. 5. Reconciliation shall be performed on a monthly basis between the subsidiary ledger and the

prepaid expense General Ledger control account.


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1300 GRANTS MANAGEMENT PROCEDURES

In this section, the procedures are described that cover revenue recognition and invoicing, billing, accounts and contributions receivable.

1301 Revenue Recognition and Invoicing

Control Objective

To ensure that grant and contract billings are adequately supported, recorded on a timely basis, and reflect the terms and conditions of the grant or contract.

Major Controls

A. Invoicing Policy Invoices shall be prepared based on contract agreement dates.

B. Invoice Format Invoice formats shall vary depending on the funding source.

C. Segregation of Unallowable Costs Accounts shall be maintained for explicitly unallowable costs. D. Internal Accounting Controls (i) Verification of services shall be performed before invoice processing. (ii) A Reconciliation of expenditures incurred or units billed to invoices shall be prepared. (iii) Control of revenue shall be achieved with the use of General Ledger control accounts.

(iv) Separation of duties between the preparation of the invoice and its review and approval shall be to the extent possible for an organization the size of the school.

Procedures

1. On a monthly basis, program costs, or an electronic spreadsheet/software noting total units served, shall be reviewed by the Interim Assistant Business Manager and recorded on an invoice format prescribed by the funding source. Unallowable or unbillable costs shall be excluded from claimed costs.

2. The invoice is entered in the Grants Receivable ledger, which, depending on the accounting software, should automatically prepare an entry to record the corresponding revenue.

3. Arithmetic extensions are verified and invoices shall be reviewed for accuracy and completeness by the Business Office and signed by the Executive Director.

4. Invoices shall be mailed to the funding source by the Business Office.

5. Copies of invoices and supporting documents shall be filed by funding source.


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1302 Grants Receivable

Control Objective

To ensure the accuracy, completeness, and timeliness of accounts receivable balances and collection.

Major Controls

A. Separation of Duties

To the extent possible, the responsibility for posting invoices shall be kept separate from those with responsibilities for cash functions.

B. Use of Control Accounts

A General Ledger control account shall be reconciled to individual receivable balances within the Grants Receivable subsidiary ledger.

Procedures

1. Payments and other adjustments shall be posted to the Grants Receivable subsidiary ledger.

2. The Grants Receivable subsidiary ledger shall be reconciled to the General Ledger control account on a monthly basis.

3. Any Grants Receivable balance greater than 90 days old shall be followed up and investigated.

4. A final report shall be submitted to the respective funding source after the end of the project period.


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1400 PAYROLL PROCEDURES Payroll procedures shall be organized under six categories: personnel requirements, personnel data, timekeeping, and preparation of payroll, payroll payment, and payroll withholdings.

1401 Personnel Requirements

Control Objective

To ensure that the Collaborative hires only those employees—full or part-time—that it absolutely needs and exerts tight control over hiring new employees.

Major Controls

Payroll Policies

The Collaborative shall adopt payroll policies for installing new employees on the payroll system and removing terminated employees from the system, as well as monitoring vacation and sick pay.

Procedures

New Employees

1. Requests for new employees shall be initiated by the Principal or Manager and compared with the approved annual personnel budget. The request is approved or denied by the Executive Director.

2. A Personnel Action Form shall be initiated when hiring a new employee. Included on this form shall be the job description, approved pay rate, and grant funding, if any. Information on this form shall be reviewed by the Director of Student Services and Human Resources and communicated to the payroll office.

3. New employees shall complete an Application for Employment.

4. New employees shall complete an IRS W-4 Form and Federal I-9 Form.

5. A CORI (Criminal Offender Record Information) background check shall be conducted on all new employees and their CORI reports shall be placed in their employment files. Human Resources handles this processing.

Vacation and Sick Pay

1. Employees shall accrue vacation time based on personnel policy of Valley Collaborative.

2. Specific regular part-time employees shall earn vacation time on a pro-rata bases based upon the Employee Handbook of Valley Collaborative.

4. Employees' earned vacation balances shall be adjusted monthly to reflect vacation time earned and taken and these records shall be reviewed by Valley Collaborative Business Office on a monthly basis.

5. Sick leave taken shall be monitored against each employee's available sick time on accounting software and these records shall be reviewed by Valley Collaborative Business Office on a monthly basis.

6. Before vacation time is paid, a Leave Request shall be prepared by the employee, which shall be reviewed and approved by employee supervisor.

7. Program Principals and Managers shall monitor vacation and sick time by evaluating data in Accounting/Human Resources system.


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8. A General Journal entry shall be prepared at year-end to record the accrued vacation liability.

9. Unused vacation time shall be based on the Employee Handbook of Valley Collaborative.

1402 Personnel Data

Control Objective

To calculate and record payroll data accurately and completely for all employees.

Major Controls


(i) A precise paper trail covering all transactions shall be kept.

(ii) Changes in personnel data shall be approved by responsible officials.

(iii) Separate payroll and personnel files shall be periodically reviewed and reconciled.

Procedures

1. Changes to personnel data shall be initiated with a Personnel Action Form when making changes in new hires, terminations, pay rate changes, or payroll deductions.

2. Authorized changes shall be communicated to the payroll office.

3. A copy of the Personnel Action Form shall be retained in the employee's personnel file.

1403 Timekeeping

Control Objective

To ensure that payment for salaries and wages is made in accordance with documented time records.

Major Controls

A. Timekeeping Policies

Employees shall be instructed on the proper charging of time to assure the accuracy of recorded time to cost objectives.

B. Time Sheet

Labor hours shall be accurately recorded and any corrections to timekeeping records, including the appropriate authorizations and approvals shall be documented.

C. Internal Reviews

The Collaborative’s supervisory personnel shall monitor the overall integrity of timekeeping.

D. Internal Accounting Controls

A reconciliation of the hours charged on time sheets to attendance records shall be completed by the Business Office on a bi-weekly basis.

Procedures

Electronic Time Entry Process


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1. Hourly employees shall approve of labor hours in Time and Attendance Software from ADP weekly.

Approval of Electronic Time Entry

1. Each employee's time entry is first approved by the employee. Supervisors require a second approval of the time before data is made available for payroll processing.

2. Approvals are again reviewed in Payroll Office before Payroll Processing. All exceptions are reported and corrected.

Reconciliation of Payroll to Time Entry

1. An overall payroll review shall be completed by the Interim Assistant Business Manager for each pay period.


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1404 Preparation of Payroll

Control Objective

To ensure that payment of salaries and wages is accurately calculated.

Major Controls


(i) Time records or contracts shall be periodically reconciled with payroll records.

Procedures

1. The Principals or a designee shall forward approved time sheets to the Business Office through ADP’s online system.

2. The total time recorded on time sheets and the number of employees shall be calculated by the Payroll Staff.

3. Recorded hours from the bi-weekly time sheets shall be accumulated by the Payroll Office.

4. The payroll reports received from the payroll office (e.g., calculations, payrolls and payroll summaries) shall be compared with time sheets, pay rates, payroll deductions, compensated absences etc., by the Interim Assistant Business Manager.

5. The Interim Assistant Business Manager shall verify gross pay and payroll deductions.

6. The total hours and number of employees shall be compared with the totals in the Payroll Register by the Director of Student Services and Human Resources.

7. The Payroll Register shall be reviewed and approved by the Interim Assistant Business Manager prior to forwarding of the payroll checks to the Human Resources Coordinator for distribution.


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1405 Payroll Payment

Control Objective

To ensure payment for salaries and wages by check, direct deposit, cash or other means shall be made only to employees entitled to receive payment.

Major Controls


(i) Pre-numbered checks shall be used and all check numbers shall be accounted for. These come directly from ADP. Valley does not issue the live payroll checks.

Procedures

1. Checks and payroll register shall are available to be reviewed on the ADP system.

2. Payroll payments by check, direct deposit or cash shall be distributed by the Collaborative for forwarding to employees and the payroll register shall be filed.

3. The Interim Assistant Business Manager shall control and monitor all undelivered and un-cashed payroll checks, respectively.

4. The payroll bank account shall be reconciled monthly by the Business Manager / Accountant and reviewed by the Executive Director.


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1406 Payroll Withholdings

Control Objective

To ensure that payment withholdings are correctly reflected and paid to the appropriate third parties.

Major Controls

A. Reconciliation of Payment and Payroll Withholdings

Payroll withholdings shall be recorded in the appropriate General Ledger control accounts and reconciled with payments made to third parties.


The payroll office calculates payroll withholdings, which shall be reviewed and verified by the Director of Student Services and Human Resources.

Procedures

1. The payroll office calculates payroll withholdings—including MTRS and MSERS deductions—for each employee. These shall be summarized by pay period and recorded in General Ledger.

2. Payments for payroll withholdings shall be reconciled with the amounts recorded in the General Ledger control accounts by the Business Manager / Accountant.

3. The Business Manager / Accountant shall review the accuracy and timeliness of payments made to third parties—including MTRS and MSRES—for payroll withholdings.

4. Original withholding and benefit election forms, maintained in the employee file, shall be prepared by employees and reviewed and approved on a periodic basis by the Director of Student Services and Human Resources.

5. The Director of Student Services and Human Resources shall prepare and file the required MTRS and MSRES reports and Internal Revenue Service and Commonwealth of Massachusetts payroll tax forms.


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1500 PROPERTY AND EQUIPMENT (P&E) PROCEDURES This section is organized into six parts: P&E acquisitions, record keeping over P&E, depreciation of P&E, inventory of P&E, disposal of P&E, and Government-furnished and Collaborative-acquired property and equipment.

1501 Property & Equipment Acquisitions

Control Objective

To control the acquisition of P&E and completely and accurately record fixed asset acquisitions in order to safeguard fixed assets from loss.

Major Controls

A. P&E Acquisitions Tied to Budget

All acquisitions of property and capital equipment shall either be designated in the approved budget, or subsequently approved by the Valley Collaborative Board of Directors.

B. P&E Acquisitions Based on Approved Requests

Official approval shall be obtained before a P & E purchase is made. This is performed by reviewing the Purchase Requisition Form prepared for the item.

C. Internal Accounting Controls

Fixed asset acquisitions shall be reconciled with capital expenditure authorizations by the Business Manager / Accountant on a quarterly basis.

Procedures

1. Capital budget requests shall be submitted annually for review and approval by the Valley Collaborative Board of Directors.

2. Authorization requests for the acquisition of fixed assets shall be reviewed against the capital budget and approved by the Treasurer, or Executive Director.

3. Each item of property and equipment received shall be identified and tagged in a visible area on the asset.

4. A copy of the Purchase Order for capital expenditures shall be entered into the fixed assets subsidiary or comparable worksheet for proper identification of all fixed assets.

5. Information on each tagged asset shall be entered in the fixed assets subsidiary or comparable worksheet.


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1502 Recordkeeping Over Property & Equipment

Control Objective

To completely and accurately record fixed asset acquisitions, transfers, and dispositions on a current basis.

Major Controls

A. Capitalization Policies

The Collaborative follows generally accepted accounting principles as applicable to special purpose business-type activity government entities. All fixed assets purchased shall be capitalized in the year of purchase, and recorded in the general ledger. The Collaborative follows the policy of capitalizing all fixed assets purchased greater than $5,000 per unit.

B. Fixed Asset Classification

Fixed assets shall be accounted for by the following classifications: land, building, equipment, betterment, leasehold improvements, equipment, furniture, and computer hardware and software.

C. Complete Record of P&E Acquisition Costs

The fixed assets subsidiary ledger contains the full history of each capital asset acquired: original acquisition cost, and any costs incurred to prepare the asset for use.

Procedures

1. Asset acquisitions, transfers, and dispositions shall be entered in the fixed assets subsidiary ledger on a periodic basis.

2. The fixed assets subsidiary ledger shall be reconciled with the control account in the general ledger on a monthly basis. Any differences shall be analyzed and resolved by the Business Manager / Accountant.


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1503 Depreciation Procedures

The Collaborative capitalizes all fixed assets when acquired, and records the historical cost of these items in the general ledger. In accordance with generally accepted accounting principles as they relate to special purpose business-type activity, government entities, under GASB 34, depreciation expense must be recorded in the general ledger. Valley Collaborative will use the straight-line method of depreciation over the assets useful life as determined as follow:

Computers 3 years Office Equipment 5 years Vehicles 5 years Office Furniture 7 years Leasehold Improvements Useful life or life of lease, whichever is less Building Improvements 20 years Building 40 years

1504 Inventory of Property & Equipment

Control Objective

To ensure that all recorded assets exist and are in use.

Major Controls


(i) All property and equipment shall be tagged when received.

(ii) Physical inventories shall be performed bi-annually.

(iii) Differences between physical inventories and amounts recorded in the control account shall be analyzed and reconciled monthly.

Procedures

1. The Business Manager / Accountant shall prepare a printout of recorded fixed assets by asset classification.

2. An inventory of fixed assets shall be taken bi-annually.

3. The inventory of fixed assets shall be compared to the amounts recorded in the general ledger control account. Differences shall be investigated and resolved by the Business Manager / Accountant monthly.


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1505 Disposal of Property & Equipment

Control Objective

To ensure that assets no longer in use are disposed of in accordance with existing policies.

Major Controls

A. Disposal Policies

The Collaborative has adopted policies on the disposition of property and equipment.


(i) Disposal or transfer of fixed assets shall occur only with proper authorization.

(ii) Periodic counts of fixed assets that is reconciled with the fixed assets recorded in the control account within the general ledger.

Procedures

1. A determination shall be made by the Collaborative personnel as to the usefulness of a fixed asset.

4. If an asset is disposed, it is recorded in the general ledger and fixed asset ledger. These accounts are reconciled quarterly.


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1506 Property & Equipment Acquired Through Government Grants/Contracts

Control Objective

To assure that property and equipment are properly obtained, used, and managed during the performance of government grants or contracts.

Major Controls

A. Record keeping

The Collaborative shall maintain detailed records on all property and equipment.

B. Custody

All property and equipment, when not in use, shall be stored in a secure area.

C. Inventory

All property and equipment shall be inventoried.

Procedures

1. All property and equipment acquired through government grants or contracts shall be assigned tag numbers and properly identified with this number in the fixed asset subsidiary ledger.

2. On a semi-annual basis, the Business Office shall request inventory of all property and equipment and shall ensure that fixed assets are being used for the purpose intended.

3. If necessary, the Collaborative shall obtain approval from the appropriate government agency for the disposition of property and equipment acquired through a government grant or contract, and only then shall the Business Manager / Accountant authorize the disposition as described in the previous section.


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1600 ACCOUNTS PAYABLE PROCEDURES This section is organized into three major parts: accounts payable, purchasing, and expense reimbursement.

1601 Accounts Payable

Control Objective

To ensure that invoices shall be accurately recorded on a timely basis for authorized purchases.

Major Control

A. Reconciliation of Accounts Payable Records

Reconciliation of source data, subsidiary ledger totals, and general ledger control accounts shall be performed periodically to ascertain the accuracy of accounts payable entries.

B. Internal Reviews

Internal reviews shall be conducted to determine if duplicate payments or overpayments exist.

Procedures

Voucher Preparation and Review of Voucher

1. Invoices shall be received by the Account Payable Office.

2. Invoices shall be compared to the Purchase Order and the packing list.

3. The invoice shall be reviewed for:

(i) The nature, quality, and quantity of goods ordered and the related price

(ii) Accuracy of all arithmetic calculations and extensions

(iii) Allowance of expenditure

(iv) Proper general ledger account and department coding

4. The invoice shall be input into the general ledger through the accounts payable subsidiary ledger after it is reviewed by the Business Office.

Purchase Discounts

1. The Business Office shall establish all vendor accounts within the accounting system upon initial use of the vendor.

2. The Business Office shall review the invoice for any purchase discount date and ensures that the vendor file is established and properly capturing any discounts allowed.

Reconciliation of Accounts Payable Records

1. The total balance in the accounts payable subsidiary ledger shall be reconciled with the general ledger control account monthly.

2. Debit balances in the accounts payable subsidiary ledger shall be resolved appropriately (e.g., an offset against other amounts due the vendor, requesting payment from the vendor, etc.)


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1602 Purchasing

Control Objective

To ensure that goods and services shall be acquired at fair and reasonable prices and the highest personal standards of conduct shall be maintained in all relationships with vendors, suppliers, and subcontractors.

Major Controls

A. Purchase Requirements

The Collaborative shall develop cost-effective and efficient purchase requirements in order to achieve full and open competition, meet delivery schedules, control inventory and material, and expedite purchases.

B. Required Competition

The Collaborative shall utilize the following procurement guidelines (In accordance with M.G.L 30B):

Contracts under $10,000 - The Collaborative shall use sound business practices when procuring goods and services for amounts less than $10,000.

Contracts from $10,000 to $35,000 - The Collaborative shall seek price quotes from at least three vendors and shall award the contract to the responsible vendor offering the supply or service needed for the lowest price.

Contracts greater $35,000 - The Collaborative shall conduct a formal advertised competition using sealed bids or proposals. An award shall be offered to the qualified bidder who meets the Collaborative's specifications and offers the lowest price. M.G.L. 30B guidelines ad regulations will be followed

Construction contracts – The Collaborative follows all state and federal guidelines inclusive of the Commonwealth’s public bidding laws.

C. Selecting the Vendor

The Collaborative shall select the most responsive and responsible vendor to provide the required materials and services, and shall promote competition in order to obtain fair and reasonable prices.

D. Internal Accounting Controls

(i) All unethical purchasing conduct shall be reported to management as required under Valley Collaborative’s Fraud Detection and Mitigation Policy. Upon completion of an investigation, management shall recover restitution for any gain resulting from such conduct.


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Procedures

Purchase Requirements

1. After approval of the annual budget, the Business Manager / Accountant shall review the Collaborative’s needs to uncover patterns of orders and opportunities for clustering orders. This shall be done to achieve volume discounts.

2 In preparing purchase requisitions, the Executive Director or designee shall identify minimum needs.

Processing Purchase Requisitions

1. The Purchase Requisitions shall include the following minimum requirements:

(i) A description of items ordered

(ii) A cost estimate

(iii) The required delivery information

(iv) A statement of the nature and purpose of the procurement

3. Purchase Requisitions shall be approved by the Principal or Executive Director, upon a careful review of the remaining budget.

4. The Principal’s shall present all Purchase Requisitions to the Executive Director for review and approval.

5. Approved Purchase Requisitions shall be forwarded to the Accounting Manager.

Processing Purchase Orders

1. All Purchase Orders shall be created by Accounting Manager shall approve the Purchase Order information that may be input by the Accounting Manager

3. Purchase Orders shall only be approved by the the Executive Director.

4. A copy of the Purchase Order shall be prepared. One copy shall be forwarded to the vendor, and an electronic copy is kept in the accounting system.

Obtaining Bids and Quotations

1. The requester of the purchase order shall request bids or quotations verbally on transactions not expected to exceed $1,000, and in writing for transactions between $1,000 and $5,000. Items greater than $5,000 shall require formal bid requests and evaluation before a Purchase Order is issued.

2. In evaluating bids received, the requester shall perform and document in writing a cost or price analysis.

Negotiation and Award

1. Consistent with the Collaborative’s goal of expanding opportunities for minority business enterprises, companies which are minority or women owned, to the extent they are available locally and qualified, shall be given an opportunity to bid on a procurement in the Collaborative’s selection process.

2. Awards may be made to other than the low bidder in circumstances where the higher bid demonstrates best value contracting procedures to the Collaborative (can use MGL c.30B as a guide). In such situations, the Business Manager / Accountant shall prepare a justification state-ment for such awards, furnishing a brief explanation of the factors leading to such a decision.


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1603 Expense Reimbursement

Control Objective

To ensure Valley Collaborative shall pay only for properly authorized business expenses.

Major Controls

A. Travel Policies

The Collaborative shall adopt policies on travel reimbursement.

B. Employee Expense Reimbursement Documentation

Employees shall obtain and furnish documentation for individual expenses and company credit card purchases.

C. Internal Accounting Controls

(i) Justification for travel shall only be approved by Principal or the Executive Director.

(ii) Documentation shall be provided for incurred reimbursable employee expenses.

(iii) Documentation and approval shall be required for all Collaborative commercial charge accounts.

Procedures

Expense Advance or Reimbursement

1. Soon after traveling, but not exceeding 30 days, an employee who seeks reimbursement for authorized expenses shall complete a Travel Report detailing the expenses incurred and also attached supporting documentation.

2. All commercial charge account purchases shall be supported by previously approved invoices in order to be reimbursed.

3. All employees’ Travel Reports and associated invoices shall be directly reviewed and approved for payment by the Principal or Executive Director.


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1700 OTHER LIABILITIES PROCEDURES This section describes procedures for recognizing and recording accrued liabilities and deferred revenue. 1701 Accrued Liabilities

Control Objective

To accurately control and record accrued liabilities.

Major Controls

A. Maintaining an Accrual Register

Valley Collaborative shall properly set up and monitor accrued liabilities and accrual accounts related to salaries and wages, vacation pay, and payroll taxes.

B. Reconciliation of the Subsidiary Schedules with the General Ledger Control Account

On a periodic basis, the Business Manager / Accountant shall perform a reconciliation between the subsidiary schedule and the general ledger control account.

Procedures

1. An accrual subsidiary schedule shall be established and maintained by the Business Manager / Accountant for each type of accrual.

2. The Collaborative shall record all accruals at fiscal year-end, or when determined necessary by the Business Manger

3. A general journal entry shall be prepared at year-end to record all accruals only after they have been reviewed and approved by the Business Manager / Accountant.


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1702 Deferred Revenue

Control Objective

To accurately control and record deferred revenue.

Major Controls

A. Maintaining a subsidiary schedule of revenue deferred

Valley Collaborative shall properly set up and monitor deferred revenue and properly record revenue in accordance with generally accepted accounting principles.

B. Reconciliation of the Subsidiary Schedule with the General Ledger Control Account

On a periodic basis, the Business Manager / Accountant shall perform reconciliation between the subsidiary schedule and the general ledger control account.

Procedures

1. A deferred revenue subsidiary schedule shall be established and maintained by the Business Manager / Accountant for each type or source of revenue for which the Collaborative receives advanced funding.

2. The Business Manager / Accountant shall determine the extent of revenue recognized and consequently the revenue deferred for all revenue sources for which the Collaborative receives advanced funding.

3. A general journal entry shall be prepared at year-end to record all deferred revenue only after the records have been reviewed and approved by the Business Manager / Accountant.


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1800 MANAGEMENT REPORTING PROCEDURES In this section, procedures are covered for supporting the annual budget, financial reporting, and tax compliance.

1801 Annual Budget Control Objective

Valley Collaborative shall develop systems to effectively support the preparation of the annual budget and its periodic review.

Major Controls

A. Budget Process

The Finance Committee shall work with the Executive Director and Business Manager / Accountant to prepare the annual operating and capital budgets and the annual cash flow projection. The budgets and projections shall be submitted to the Valley Collaborative Board of Directors for approval.


Accuracy and completeness of the budgets and projection

Procedures

1. In preparation of the annual operating and capital budgets and cash flow projection, the Business Manager / Accountant shall prepare preliminary budgets and the projection for review by the Executive Director in consultation with the Finance Committee.

2. To support the budgets and projection estimates, the Business Manager / Accountant shall prepare current year-to-date financial data with projections of year-end totals.

3. The Executive Director and the Finance Committee shall review the budgets and projection submitted by the Business Manager / Accountant for completeness and reasonableness.

4. The Valley Collaborative Board of Directors shall approve and adopt the final budgets and projections.

5. The adopted budget totals shall be entered in the general ledger by the Business Manager / Accountant for the new fiscal year, in order to prepare budget to actual reports.


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1802 Financial Reporting

Control Objective

Valley Collaborative shall develop systems to ensure the accuracy, completeness, and timeliness of financial reporting to support decision-making.

Major Controls

A. Schedule

Monthly managerial reports shall be prepared based on a pre-determined schedule.

B. Review and Approval

Financial reports shall be reviewed for accuracy and completeness.

C. Audit

The annual financial statements of the Collaborative shall be audited by a certified public accounting firm.

Procedures

1. The Business Manager / Accountant shall prepare monthly budget vs. actual financial reports and a cash flow projection for all regular Valley Collaborative Board of Directors meetings.

2. The Collaborative shall submit to an annual audit of its financial statements by a qualified certified public accounting firm, in accordance with 603 CMR 50.00 and M.G.L. Chapter 40 Section 4E

3. The Collaborative shall submit the audited financial statements to the Office of the State Auditor and the Commonwealth of Massachusetts Department of Education Educational Collaborative Office by the January 1 statutory deadline.

1803 Payroll Tax Compliance

Control Objective

Valley Collaborative shall develop systems to accurately prepare and file required tax documents on a timely basis.

Major Controls

A. Preparation

The Collaborative utilizes ADP to assist in the preparation of periodic payroll tax filings.

B. Approval of Tax Returns

Payroll tax documents shall be reviewed and approved by ADP.

Procedures

1. The Collaborative shall maintain a schedule of required filing due dates for at a minimum the following documents:

(i) IRS Form W-2 - Wage and Tax Statement.


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(ii) IRS Form W-3 - Transmittal of Income and Tax Statements.

(iii) IRS Form 941 - Employer's Quarterly Federal Tax Return for Federal Income Tax Withheld from Wages and FICA Taxes.

(iv) IRS Form 1099 MISC - U.S. Annual Information Return for Recipients of Miscellaneous Income.

(v) Quarterly and annual state(s) unemployment tax return(s).

(vi) MTRS and MSERS retirement deduction reporting

2. Before submission, all payroll tax documents and the supporting schedules shall be reviewed and approved by ADP for accuracy and completeness.


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APPENDIX A: Sample Forms


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Valley Collaborative Sample Purchase Order


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Valley Collaborative Sample Request for Purchase Order Form


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Valley Collaborative Sample Petty Cash Worksheet


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Valley Collaborative Sample Weekly Time Sheet


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Valley Collaborative Sample Expense Report


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Valley Collaborative Sample Employee New Hire /Information Change Form


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Financial Policies & Procedures Manual · 2019. 9. 17. · 900 CONSULTANTS AND CONTRACTORS...

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Transcript of Financial Policies & Procedures Manual · 2019. 9. 17. · 900 CONSULTANTS AND CONTRACTORS...